ACCY130 -Planning and Decision Making

internal/management accounting

-used inside the organisation

-for managers

-helps with planning, decision making, and control

-unregulated

-detailed

-can include financial and non-financial info

-forward and backward looking

external/financial accounting

-used outside the organisation

-for investors, lenders, regulators

-helps with accountability

-highly regulated

-aggregated

-only financial info

-backward looking

critical thinking

making reasoned, logical judgements based on asking the right questions which is important for managers as they must identify problems, evaluate alternatives, and choose the best option

mission statement

defines the organisation’s purpose and guides managerial decision making

importance of considering costs vs benefits when collecting information

information should only be collected if its benefits outweigh its collection costs

factors that influence whether management accounting information is disclosed

stakeholder relevance, reliability, accountability, and competitve advantage

importance of reliability

unreliable information can mislead stakeholder and create legal risks

risk of managers focusing only on short term performance

they may ignore long term benefits and sustainability

backward looking information

historical data showing what actually happened, such as past sales, costs, or performance

forward looking information

forecasts and budgets predicting what is expected to happen in the future

purpose of control phase

to compare actual results with planned results and adjust future plans

variance

the difference between actual results and budgeted results, where managers can investigate causes and revise future plans accordingly

single-loop learning

keeping performnace within set targets without questioning whether the targets are appropiate, most suitable for simple, stable tasks with minimal uncertainty

double-loop learning

questioning whether the strategy or targets themselves are appropiate, most suitable for complex environments where assumptions or strategies may need to change

reason for planning being continuous

because plans must be updated as new information and results become available

stakeholder expectation considerations

customers, regulators, financial providers, competitors, social/environmental impacts